Chinese arms of Indian firms brace for storm

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“We think the worst is over for JLR in China. With strong launches and the management correcting its pricing mistakes, growth will resume in China despite the devaluation hurting it in terms of profitability,” said Nitesh Sharma, an analyst with PhillipCapital (India).

Hindalco subsidiary Novelis had set up a manufacturing plant in China in 2012 to cash in on the rising automobile and beer can markets. But demand is expected to slow down this year. “Any slowdown in Chinese demand is bad news for Hindalco, which is yet to receive any returns on its $6-billion investment in Novelis,” said an analyst.

An executive with the Anil Ambani group said Reliance Communications and Reliance Power, which took loans from Chinese banks to fund their expansion, would not be affected by the yuan’s depreciation because the loans are dollar-denominated.

In January 2012, Chinese banks lent $1.18 billion to Reliance Communications to repay its bonds due for redemption in March 2012. In the same year, Chinese banks lent $1.1 billion to Reliance Power for the Sasan power project.

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